General Fund could face big cuts without new revenues

House Ways and Means General Fund committee chairman Steve Clouse discusses the need for new revenues in the state’s troubeld General Fund budget on April 1, 2015.(Photo: Brian Lyman/Advertiser)Buy Photo

The state’s General Fund budget could be cut by over $240 million next year if the Legislature does not approve new revenues, according to estimates released by the Legislative Fiscal Office and the House and Senate budget chairs Wednesday.

Those cuts could have a profound impact on public safety, health and health services, the budget chairs said.

“This is ground zero for the future of the funding of state government,” Senate Finance and Taxation General Fund budget chairman Arthur Orr, R-Decatur told members of the House Ways and Means General Fund committee Wednesday. “Those of us in the Senate want to work with you in any way we can. We have a huge task ahead of us.”

The General Fund, which funds most noneducation programs in the state, faces a shortfall of at least $290 million next year, according to the Legislative Fiscal Office. The governor’s office says there will be a long-term shortfall of over $700 million in the budget, due to needs in Medicaid and Corrections and the loss of one-time money.

Bentley proposed a $541 million tax package in February, along with a shifting of $187 million in existing revenue to the state’s General Fund. The proposals have already encountered opposition from lawmakers. House Ways and Means General Fund chairman Steve Clouse, R-Ozark, said the proposal was a “real, real rough draft” to show what would happen to the budget without new revenues.

“We’ve taken some liberties here to make it a reasoned approach, (and) not cutting everything across the board evenly,” Clouse said.

The cuts would be deep. Overall, the General Fund budget would be slashed 11 percent, but agencies could feel additional pain. Courts would be cut 20 percent; Mental Health would be cut 23.5 percent and the Department of Human Resources, which administers a number of anti-poverty programs in the state, would be cut nearly 30 percent.

“It’s very bleak,” Clouse said. “We’ve got to have additional funds.”

The proposal assumes that the General Fund will be able to get $237 million in use tax from the Educational Trust Fund, along with $187 million in funding responsibilities being shifted out of the ETF. Clouse said that was being negotiated with education chairs. Without the net gain of $50 million, Clouse said the cuts to the General Fund could be steeper.

Other agencies would see smaller cuts, but those cuts could have a cascading effect on other revenue sources for federal agencies. The budget outline has a cut of about $20 million to the state’s Medicaid Agency, which gets roughly two dollars from the federal government for every state dollar. A $20 million cut in state funds could quickly turn into a $60 million loss in Medicaid.

“80 percent of people in nursing homes depend on Medicaid,” Clouse said.

Lawmakers have already begun altering key aspects of Bentley’s proposal. The governor sought to increase a sales tax on automobiles from two percent to four percent; a proposal pending in the House would raise it to three percent. Bentley sought an 82.5 cent per pack increase in the state’s tobacco tax; the House will likely consider an alternative proposal from Rep. Patricia Todd, D-Birmingham that would raise it by 32.5 cents.

In changing the proposals, lawmakers say they are trying to find something that the Republican caucus can agree to. Bentley said Tuesday he was determined to find $541 million for the budget.

The governor’s proposed $2.3 billion 2016 General Fund budget, which includes his tax proposals, would effectively level-fund most state agencies. Even with level funding, there could be reductions in the state employee workforce and increased insurance costs for state workers.